Another Arizona Walk-Away

[dogatemy]

I figured I would take this opportunity to post my walk-away story now that I am officially late on my mortgage. This post is intended to be a bit humorous because it clearly outlines how the banks have lost sight of what's important - their customers - the homeowner - and the taxpayers who are keeping them afloat.

Arizona
$125k on my 1st with Citi (non-recourse) - $1125/month
$30k on my 2nd with Chase (recourse) - $325/month
Paid $130k for the house in Oct 2006.

Chase, for lack of a better phrase, begged me to take a $80k HELOC out on my house in early 2007. I decided to do some home improvements. I paid the contractor to demolish my 55 year old kitchen, remove all my flooring, replace all the windows with double-pane and do some other cosmetic renovations. I wrote a check for the demolition which went well.

When the re-construction started; I wrote a check to the contractor to order all the materials and I went on a month-long company paid vacation (the first day off in 6 years). 2 weeks later the contractor called screaming bloody murder about how the check bounced. I returned home as soon as possible to find my house in shambles. Chase gave me the run-around until I finally found out, via a letter waiting for me at the post office, that Chase had terminated my HELOC without notice and refused payments on any checks written against the HELOC in the previous 21 days.

The contractor filed for bankruptcy and liquidated the following month.

Fast forwared to March of 2009

I bought a foreclosure in the same zipcode for $70k. Borrowed half from my 401k. The house is larger, nicer, has a pool but needs a roof and new AC unit. There is also a huge workshop/office in the yard that has termite damage and needs to be demolished/rebuilt or repaired. My plans were to renovate and rent it out. The mortgage payments are about $4xx / month. I still fail to understand how any bank believes I can afford another $500/month for a vacant house.

The girlfriend

In exactly 1 year my girlfriend of 6 years will be moving in with me after she graduates college. She won't move in unless I have a kitchen.

It is time to get a kitchen

I called Chase at the end of March and asked to have my HELOC re-enstated because my house is in shambles and I really need a kitchen. Chase refused. Chase then threatened to put me in default unless I restored the house to its 'former condition' to the satisfaction of their inspector within 60 days. I asked..

Why would you foreclose on a house without a kitchen?
Why not keep taking my payments?

The representative explained that they would not foreclose.. they would just put me in default. The interest rate on default loans is 35% raising my payments from about $300/month to about $1800/month. (I should note that they probably can't do this but why argue the point?)

Called Citi for help - loan mod, principal reduction, refinance my 1st and 2nd into one loan

My next call was to Citi. My thought was they might be able to offer a principal reduction which would allow me to refinance my 1st and 2nd into the same loan. If I could refinance with a lower interest rate then I could justify spending the money on a kitchen. I owe $125k and the house is worth $50k so maybe they would be willing to save $50k off the mortgage. This would allow me to get my payments down then pay for a kitchen with a 401k loan or out of pocket.

They were not very helpful.

Citi says they can't help unless I am 90 days behind and still wouldn't unless I can document a hardship. I make $4k/month and my mortgage payments are $1450/month. If you consider another $1,000/month for taxes, eating out 3 times/day, medical bills and savings then it does not leave much. Would $1800/month HELOC payments constitute a hardship? Yes. But under those circumstances they won't refinance the loan (only adjust the terms of the loan) and since the loan is so far under water there is nothing they would be able to do. They also said any refinance would require an appraisal and you can't get an appraisal without a kitchen.

I'm not happy.

The next day I am told that my company is cutting my salary another $4,000 (in addition to the $14,000 already cut during the previous year). My pets also need medical attention because 1 has an ear infection and the other is not eating/drinking.

This was the straw that broke the camel's back. I don't have enough money to restore my kitchen to its former glory and I don't have cash to burn. I don't have $1500/month for a house worth $50k. The house, even with a kitchen, will take 15 years before it even approaches the $180,000 I would owe on it (when you combine the 1st, 2nd and restoration costs). It wasn't even worth that when the market peaked in late 2006/early 2007. I'm constantly broke and eating out 3 times/day. I'm running in place. This is insanity and makes no financial sense.

Walk-away

I called my attorney and told him I wanted to bring by the loan documents and discuss options. He charged me $125 for 30 minutes of his time. He basically said I could stop making payments, let them take the house, move into the investment property and when Chase is ready to settle then offer them 10-15%. I asked about a deficiency lawsuit because of the kitchen. He said there was no justification for a deficiency because I intended to return the kitchen to its former condition and I could not foresee Chase's decision (in bad faith) to terminate my HELOC during construction. He would feel much more comfortable arguing on my behalf rather than on behalf of the lender.

I also asked about buy-and-bail (considering proximity of the houses and time I let the house go into foreclosure). He said there was no way I could have foreseen the salary reduction, the ***'s medical bills and the reduction in salary after closing on the investment property. I was also truthful on the mortgage application that I did not intend to occupy the house (although honestly - intent is almost impossible to prove and even harder to get a conviction). He said that as long as I was paying the higher interest rate for the rental, it was vacant when I bought it and there was no fraud on the application then he could not foresee any investigation for buy-and-bail or mortgage fraud.

The phone calls begin

I am officially late as of 4/10. The phone calls started at 8am on 4/11. The first call was from Chase. They wanted to charge me $35 for the privilege of making a check-by-phone payment. I explained that I was not making any additional payments and it would be in Chase's best interest to settle. He said Chase has a policy against settling any HELOCs until after a foreclosure. After foreclosure then he said a 10-15% settlement would probably be acceptable. I reminded him that Chase would not get a dime out of the foreclosure. He said that he knows but it is Chase policy that foreclosures must preceed any settlment and there is nothing he can do. He did offer to give me the number so I can fax them a letter so they won't call me anymore. I also told him that I *may* consider resuming payments if Chase was willing to write a letter saying Chase would forfeit their right to foreclose or put my loan in default due to the lack of a kitchen. He said that was not something they were prepared to do. I thanked him for his time.

Waiting..

I am waiting now.

The negative: I have no idea how long the process will take so I am trying to get the renovations on the investment property done as quickly as possible. Some have said the foreclosure process could take several months while there seems to be some consensus that the banks are accelerating their efforts now that the terms of the Obama plan are known. I am angry, nervous and I have bouts of depression over the idea of leaving my home. I hoped this would be the last house I would ever live in.

The positive: I am no longer constantly under pressure. If I loose my job and had to cash out my 401k then I would still have many years of mortgage payments (after taxes).

$32000 / $1500 = 21 months (with current mortgage payments)
$32000 / $450 = 71 months (with investment property mortgage payments)

This is good considering my company has been slowly cutting staff.

The new house also has a brand new kitchen. After 2 years of eating out 3 times a day I have put on weight. Hopefully now I can start loosing weight again. The lower mortgage payments will allow me to take more vacations and travel more so hopefully we'll have that opportunity in the near future. My cats got medical attention and are now feeling better. I can also begin saving again (rather than being perpetually broke). I'm no longer scared everytime my car makes a funny noise.

[snapple candy]

dogatemy,
great storyteller!Thanks for sharing, as well as the humor. I was served Trustee Notice of Sale today, I have until Aug 24th until I walk away unless Chase gives me a smoking good deal.Like that is gonna happen.If we cannot find some humor in all this, we are truly lost. good luck with Chase.

[dogatemy]

Originally Posted by snapple candy

I was served Trustee Notice of Sale today, I have until Aug 24th until I walk away unless Chase gives me a smoking good deal.

ohhhhmmmmm... ohhhhmmm... *eyes suddenly wide* I see offers of check-by-phone payments in your future!

hehehehe..

When did you stop making payments? Honestly I am still not clear on exactly how this process works. From what I understand you will be harassed by phone, then harassed by mail, possibly harassed by text message, then you receive a Notice of Default, then a Trustee Notice of Sale then a notice of eviction? Is that about right?

[snapple candy]

Dogatemy,
I havent made a payment in 11 mths. I never have received a phone call except by loan negotiator whom I would have to harass just to get a call back. I started faxing and contacting WAMU within less than 30 days of my first late payment trying to work something out. It took me 4-5 mths of constant phone calls to finally get terms out of them (reduction of % on my interest only loan) when they offered me a 4 mth forbearance, then to go out and get a 2nd job so I would qualify for it. I agreed, did what they said,I began contacting them 1 mth before forbearance up. Again no return phone calls for over 30 days until I finally pressed 0 and representative tells me that in the system they were just waiting for employment verification. No one had even asked me for it and when I did finally get the negotiator, I never was asked for it. I do believe these negotiators will put lies in the system/file to make it look like they are doing their job correctly. So then they say ok, I am approved and state terms. When I say that was not what you offered me, this wont work for me, the loan negotiator says she never offered me that. She totally lied.
I filed a complaint against them with Comptroller office which they received. In the meantime, I call Chase Executive offices and rattle their cage. I am then assigned a supervisor at WAMU (since was wamu). In their response to my complaint they totally sidestep the issue of what they has previously offered me and the breech of verbal terms. I had to insist they review my modifcation under Obama guidelines since this all occurred during rollout of that. I am told to re-submit mod application.....this time go to Chase website and use application. I do so and faxed it in on April 10th. I called the supervisor a week ago to confirm receipt. No return call. So I call customer service whom confirms receipt. Yesterday I receive the Notice of Trustee Sale dated the 17th. I call WAMU and say what is going on? I didnt even get served Notice of Default. They claim I was mailed it out on March 31 and then some more on April 3rd. I have never received anything of the sort. The person at WAMu said you really need to check with your post office over and over. These guys are liars and cheats. I havent been concentrating on foreclosure process myself and dont understand how it all works yet. I believe they want to foreclose and have stretched it out to such a point (intentionally)that I will just walk away. I am not playing their game of accepting a unworkable and unsubstainable loan modification. I dont have much fight left in me at this point and they have so dragged this on for so long and caused me so much stress that I just dont care anymore. I know they are not operating in good faith and their is not much I can do about it. Your story really shares much of how I have been feeling for months. The car, the animals, etc. I was able to barter with my vet for surgery on my dog and somehow I have managed to get a few things done to keep the car going since I havent made any payments for awhile. I have not been able to save anything because I am so burdened down with care of 3 kids, medical bills and little employment at low pay. Just cant get my head above water since divorce already had pushed me into BK. I have been waiting for this to happen I suppose and preparing myself mentally. Maybe it is all for the best since I am 100K underwater and we have worst unemployment in the state that is pushing 15% or more and they have not seen bottom yet.

[AZChick]

Congrats on starting your journey dog, here in az in seems to take about 7 months from the last payment to the sale of the home. I never got a NOD but have recieved about 40 notice of trustee sale letters. No more calls though just harrassing mail. I got the NOT after being about 120+ days late. I would def. enjoy the new home your bought and forget about the other one, they seem to be very unreasonable, no point in causing more stress to an already stressful situation. The best of luck to you....

[fallacy]

The funny thing is GMAC begged me to take out an additional $35k on my 2nd on top of the $10k I was already required to take out to cover the balance of the first with closing costs. They even went 110% over the appraised value of my house. I was a sucker and listened to them.

I was officially late April 10, and I received two calls on April 15 and one call on April 16. Nothing since then. I am holding out in hopes of settling the 2nd.

The house my relative is purchasing on my behalf and letting me rent until I can buy it back will close in the middle of May.

[dogatemy]

Originally Posted by snapple candy

Maybe it is all for the best since I am 100K underwater and we have worst unemployment in the state that is pushing 15% or more and they have not seen bottom yet.

I feel terrible about what you and so many others are going through right now. I firmly believe these banks should suffer for the pain and suffering they are causing. For everyone one of our houses they eat.. thankfully it means they will get less for the next one. I am just angry as hell that they are getting bailout money without criminal prosecution.

What are your plans after this is over? Can you move into a space that you can afford? I moved to Arizona after the northeast blizzard of 99. I just packed what I needed into my car and left. When I showed up in Arizona I did not have a job, a place to live or a dime to my name. I'm not sure I would suggest you do the same exactly (esp with 3 kids) but this may be your opportunity to start spreading your wings and expanding your scope of opportunities. 15% unemployment is terrible.

[dogatemy]

Originally Posted by fallacy

The funny thing is GMAC begged me to take out an additional $35k on my 2nd on top of the $10k I was already required to take out to cover the balance of the first with closing costs. They even went 110% over the appraised value of my house. I was a sucker and listened to them.

What really makes me angry is that I never wrote a check for $80k, put it in a safe deposit box and waited for the economy to tank! I could have let them foreclose, bought my house back in cash at auction and still had money to settle. *sigh* Hindsight is always 20/20.

[snapple candy]

Hey dogatemy,
I am not sure what to do at this point. I can get a really cheap place here for rent but problem is there are absolutely no jobs. Any there are, pay just above minimum wage. I have been going to school to improve and update my job skills for when the economy does turn around and in preparation of teens moving on (my youngest turning 15) although I suspect these teens will be with me until age 21. I am torn about do I stay and live for cheap and finish degree with no hope of decent part-time or even full-time job, or go to more expensive area with better job and school opportunities. Moving three kids takes some serious consideration. Spreading my wings sounds great.

[kent302]

I am with you there. I also had a loan with Chase in 2002, on a house that I sold. My then broker would call me out of the blue, "Kenny, I just re-fi your loan to a lower rate. It is going to save you money. Just come in and sign, better yet, I will send Linda over to your office at lunch to make it easy. We take care of you, right?"
Back then I didn't know recourse from a golf course. But I did feel a little queasy about resetting my 30 yr debt. But at least I was schooled by my ex to never get ARM/NegAm. She took my money but at least she taught me one thing useful. heh,heh...

[dogatemy]

I just wanted to post an update. It has been about 2 months since the initial post.

4/29
Received a very "official looking" letter from Citi saying I should call right away, pay about $300 for the privilege of a check-by-phone payment and if I didn't then they would report me to the credit bureau. If the letter was not designed to look so threatening then I bet they would go on to tell me that I will be responsible for the death of countless innocent kittens.

5/3
Received a letter from Citi saying the slaughtering of the kittens ended on the second moon of May and I am now officially a part of the deadbeat's club. I could still redeem myself with payment of $300 in fees. If I failed to do so then "additional action may be necessary". Very ominous.

On 5/15
I received a letter from CitiMortgage saying that I was in default and I needed to call right away to pay many fees. If I failed to make my payment then they would send an inspector by the house. If the house was 'abandoned' then they would secure the premises and charge me for the privilege. The letter said monthly inspections would continue and I would have to pay for each inspection. I still live there and I don't like the idea of people poking around my house when i'm not home but I guess there is little I can do about it.

5/18
I accidentally answered the phone at work. This time it was Chase. I explained that I am taking a huge pay cut with a possibility of job loss, my business is not making any money and I would be happy to liquidate what is left in my IRA to settle the debt. He said they would not consider a settlement unless I was paid in full.

In order to get your account settled.. what is the name of your bank and checking account number where we can debit your past due balance from?

I have tried to be honorable and respectful when these guys call because I know they are just trying to do their job. This is where honor and respect cease because he now thinks I was born yesterday and lying to me will accomplish his goals. My response:

hehehehe... no. *silence*

I wanted to make sure he thought about what I had just said before continuing. I tell him I am not making any payments. I am happy to settle the debt but short of a settlement there is nothing more to discuss. He then says that I must make the payment before they will discuss a settlement and.. "you better make the payment because you signed a contract that states.. ". I cut him off.

"In that case.. call back when you are ready to settle.. Goodbye" *click*.

I am wondering if Chase can deduct the HELOC payment from my Chase credit card without my consent? Anyone know?

[knownick]

Originally Posted by dogatemy

I am wondering if Chase can deduct the HELOC payment from my Chase credit card without my consent? Anyone know?

Wouldn't that kinda be like robbing Peter to pay... Peter?

I doubt they would be able to charge a payment to your card without your expressed consent, but who knows what they might be willing to try.

[dogatemy]

Originally Posted by knownick

Wouldn't that kinda be like robbing Peter to pay... Peter?

I doubt they would be able to charge a payment to your card without your expressed consent, but who knows what they might be willing to try.

I am just curious because I depend on short term capital to fund my business. If the cards suddenly disappeared then I will need to juggle some funds. Plus.. my car, home and bike insurance pull credit scores to determine my rates. If I can limit the damage too these 2 accounts and keep the rest in good standing then I expect to restore my FICO to its former glory in a couple of years. Who knows.. I might want to buy another house at some point in the future! :-P

[knownick]

Originally Posted by dogatemy

I am just curious because I depend on short term capital to fund my business. If the cards suddenly disappeared then I will need to juggle some funds.

FWIW, you should probably start preparing for this. Once I started missing payments I had my credit lines drastically reduced and fully expect that at least one or two of them will close the accounts altogether as time marches on.

[dogatemy]

Originally Posted by knownick

FWIW, you should probably start preparing for this. Once I started missing payments I had my credit lines drastically reduced and fully expect that at least one or two of them will close the accounts altogether as time marches on.

I am making the preparations now. Since I missed my first payment back on 4/1 .. I have been doing my best to get ahead of the train. The investment house needed a roof which I just finished paying in cash. Now it is time to start socking away money into a saving account.

[Enough Already]

Hi Dogagemy,

Thanks for the update. It sounds like good old fun and games with the debt collections side of Chase. My loans are with Chase as well.

I agree with Knownick. I don't think they would charge your card without your approval, and it would be exactly like stealing from Peter to pay Paul. I do think it's good that you're socking your money away and will have other ways to get cash available.

We missed our first payments in Jan (late as of mid Feb), so I guess we're officially 4 months late now. We have not received any notices yet of our credit limits being lowered, but I do expect it.

[dogatemy]

Originally Posted by Enough Already

We missed our first payments in Jan (late as of mid Feb), so I guess we're officially 4 months late now. We have not received any notices yet of our credit limits being lowered, but I do expect it.

I can't imagine the credit card companies don't check credit reports monthly. Is your score still falling? I figured I would wait for the 3 month mark to check mine..

[Enough Already]

Honestly, I haven't checked my score since I held my breath and jumped! I figured the credit would be ruined for sure and I didn't want to put salt in the wound.

Although, we did print off a copy of our beautiful credit scores in case we'll need them for anything (unlikely it would mean much to anyone) and that's about it. We don't carry cc balances, so that keeps the pressure off in that regard.

Cash for the roof is a great way to go. We're going cash from now on. We have a rental property that we plan to move into. It has a MUCH smaller mortgage and I too look forward to the $900 a month payment (includes taxes and insurance). Bye bye $3000 a month mortgage!!

Keep us posted as you go!

[dogatemy]

Originally Posted by Enough Already

I too look forward to the $900 a month payment (includes taxes and insurance). Bye bye $3000 a month mortgage!!

Keep us posted as you go!

mmmmhmmmmm... the sweet smell of solvency.. hehehehehee

[fallacy]

Originally Posted by dogatemy

mmmmhmmmmm... the sweet smell of solvency.. hehehehehee

I'm going from a 1,000 sq ft home with 2 bedrooms/1 bathroom where I was paying over $1700/month to a 2,500 sq ft home with 4 bedrooms/3 bathrooms where I will be paying $850/month

[snapple candy]

Going to a nicer, bigger house for less money and no mortgage huge payment...........priceless.

I dont think Chase can hit your credit card but I do know someone that had a bank hit their overdraft protection line of credit for a payment. Somehow that was legal so close off those lines of credit if you have checking at Chase. I have all my account at separate banks so they cant pull any shananigons.

[dogatemy]

UPDATE 6/3/09:

I am now 62 days late.

Citi
Citi has been calling feverishly but EVERY CALL has been an auto dialer. I have even answered the phone and waited to speak with a representative but waiting longer than 30 seconds for an agent seems pointless. I mean.. they called me! Why should I wait for them? They are now sending letters saying it is URGENT that I call them IMMEDIATELY and pay about $300 in fees or they'll report me to the credit bureaus. Are they serious? It has been 62 days. I know they already reported my late payments to the credit bureaus.

Chase
The HELOC has been sent to loss mitigation. I spoke with the Loss Mitigation Agent this morning. He told me that a $6000 settlement was acceptable but I needed to provide the following documentation:

- Hardship letter
- Settlement offer
- 3 months of complete bank statements for all account (both business and personal)
- 2 years of tax returns
- profit and loss statement from my business
- W2s for any other income
- recent IRA and 401k statements

I have very mixed feelings about this process. I know for a fact that "this call is an attempt to collect a debt and any information obtained during this call or subsequent calls will be used for that purpose."

Does anyone see any reason why I should consider providing this information?

Moving on...
I am reading quite a bit about banks terminating lines of credit without warning leading to liquidity issues for small businesses. I have decided to buy up a few prepaid Mastercards.

If Chase and BOA leave my accounts open and make no changes to my credit limits in the next 90 days then I can cash out the prepaid cards and pay off the balance. If they cancel my cards or reduce my limits then they can eat the losses and my business won't collapse.

[Irish Gal]

Originally Posted by dogatemy

I have decided to buy up a few prepaid Mastercards.

Hey dogatemy,

How does that work, "prepaid" credit cards ? Never heard of that process before. I'm impressed with how thorough and forward thinking you are! Good luck.

[BinAZ]

That sucks they want all of that info to do the settlement. It might be part of their procedures. Maybe if you hold out longer you can still settle and not have to provide all of that info.

[BinAZ]

Also, I thought Chase told someone else here with a HELOC that they couldn't do a settlement until after the foreclosure is completed.